Two-speed global economy for 2012, says Standard Chartered

Standard Chartered, the emerging markets-focused bank, sees 2012 as a year of a two-speed global economy. The bank sees a slowing global economy in 2012, with a fragile West and a resilient Asia, Africa, Middle East and Latin America.

Analysts at the bank say the mounting crisis in the advanced economies is expected to cause the euro area (-1.5%) and the UK (-1.3%) to fall back into recession and US growth (+1.7%) to remain below-trend.

The world economy grew strongly in 2010, expanding 4.3%, before cooling in 2011, when it grew by around 3.0%. In 2012, Standard Chartered expects a significant slowdown in the first half of the year because of the crisis in the West, slowing global growth to 2.2% for the full-year.

Gerard Lyons, chief economist and global head of research, said: “This points to the continuation of a two-speed world where a fragile West contrasts with a resilient East. It is a divided and disconnected world economy facing major policy dilemmas.”

No region is fully decoupled from events elsewhere, says Lyons. “During the first half of 2012, problems in Europe and the West will weigh on global growth. By the second half, stronger growth across China and other emerging economies should pull up worldwide activity. It will be a recovery made in the East and felt in the West. If ever one needed to illustrate the shift in the balance of power, this is it.”

In its annual Global Focus report, the bank forecasts that Asia’s gross domestic product (GDP) growth will slow to a still-robust 6.5% in 2012 from 7.3% in 2011. China is expected to cool significantly in the first few months of 2012 before rebounding, helped by a major policy boost. As a result, China’s growth will decelerate from 9.2% to 8.1% next year.

Growth in India, Asia’s third-largest economy, is expected to accelerate mildly to 7.4% in the fiscal year starting 1 April, 2012, from 7.0% in the current financial year. Indonesia, South East Asia’s largest economy, is forecast to slow to 5.8% from 6.5%.

There are significant underlying growth drivers across the emerging world, including a rapidly expanding middle class, rising infrastructure investment and growing business ties along the `New Trade Corridors’ linking Asia, Africa, the Middle East and Latin America. These factors are likely to become more pronounced as Europe contracts and US consumers deleverage.

The Bank sees similar resilience in Africa, where growth in the two largest economies – South Africa and Nigeria – is likely to slow marginally to 3.1% and 6.9%, respectively, in 2012, from 3.2% and 7.2% this year. In Latin America, Brazil’s growth is likely to slow to 2.5% from 3.0%.

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